We recently compiled a list titled 10 Best Dividend Penny Stocks to Buy Now. In this article, we will look at where Gray Television, Inc. (NYSE:GTN) ranks among the best dividend stocks to buy now.
Penny stocks, typically defined as shares trading below $5, present a unique opportunity to investors who wish to buy stocks at “ground floor” prices. Investors usually buy such stocks in hopes of them soaring off. However, even though penny stocks may be low-priced, they do come with a lot of risk. Since such stocks don’t necessarily have to disclose the same type of information as other stocks on established exchanges, are susceptible to “pump and dump” schemes, may have low liquidity, and are often thinly traded, investing in them isn’t for the faint of the heart. For example, in 2018, one stock promoter was convicted for inflating share values by approximately $100 million through such schemes. Nevertheless, investors may often find themselves looking for such cheapest stocks that pay the highest dividends. This strategy is particularly appealing to income-focused investors, especially those who don’t have a lot of capital to invest but are looking for a consistent flow of income.
This is because even with a small portfolio allocation, penny stocks can have massive impacts on total portfolio returns. When some of the hottest penny stocks surge, they often deliver multi-bagger returns in a matter of weeks. That said, the outlook for 2024 remains rather mixed. While potential rate cuts may support asset markets, persistent growth concerns and geopolitical tensions serve as headwinds. Economic growth is expected to decelerate significantly, with forecasts indicating a slowdown to around 0.7% real GDP growth. This slowdown could dampen consumer spending, which is a significant driver for many companies, such as those in the penny stock sector.
Moreover, while penny stocks are notorious for being inherently risky and suitable for short-term gains, not all of them necessarily are. In fact, some penny stocks can be hidden gems to invest in, offering exponential gains to their investors. The trick lies in careful fundamental analysis and assessing why a particular penny stock is trading at its current price. Other factors to look at include industry potential, a sound management team, and transparency. Penny stocks are not only attractive to retail investors, but institutional investors and hedge funds have also started taking interest in them over the years. For instance, ARK Investment Management, Renaissance Technologies, and Citadel Advisors are some prominent funds investing in penny stocks that show promise in areas such as biotech, technology, and other industries, taking calculated risks to capitalize on long-term gains.
As of September, there are an estimated 1,800 stocks listed on major American stock exchanges that are trading at $5 per share, or less. Even though many of these stocks come with their fair share of problems, such as a poor balance sheet, there are yet many others that are worthy of discussion. It pays to know that penny stocks, particularly those penny stocks that give dividends, are capable of providing unique investment opportunities. While investors should proceed with caution when approaching these stocks, doing so with a calculated approach may often prove to be successful.
Methodology
Even though penny stocks aren’t the most preferred choice of risk-averse investors during market downturns, there are still many good penny stocks that give high dividends. To compile our list of best dividend penny stocks to buy now, we screened for stocks that have a share price of $5 or below, with 5% or above dividend yields. Next, we scanned Insider Monkey’s proprietary database of hedge funds and picked 10 penny stocks with the highest number of hedge fund investors.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Gray Television, Inc. (NYSE:GTN)
Number of Hedge Funds: 22 (2024Q2)
Share Price as of the Close of September 25: $4.95
Gray Television, Inc. (NYSE:GTN) is an American television broadcasting company that owns and operates television stations and digital assets in the US. Its offerings include sports, local news, weather, and entertainment programming across its network of stations.
The company has delivered sound performance in the second quarter, driven both by revenue growth and cost management. The earnings per share were $0.09. Total revenue reached $826 million, a 2% increase from the same quarter of the prior year. Net income also rose significantly from $4 million in Q2, 2023 to $22 million in the present quarter. Even though core advertising revenue was slightly below expectations, political advertising revenue in the second quarter increased 292% from the same period last year to $47 million. Despite a challenging environment, the company’s cost control strategies have led to a stable EBITDA of $225 million. Moreover, the company has also reduced its core and retransmission revenues forecast for the year. Nevertheless, political revenues are expected to continue driving results.
Gray Television, Inc. (NYSE:GTN) has also been making improvements to its balance sheet through efforts such as extending debt maturities. Moreover, the company has been involved in launching new networks, such as Rock Entertainment Sports and Palmetto Sports and Entertainment to enhance its content reach and diversification. The company’s investors will be receiving a payment of $0.08 per share on September 30th. Its dividend yield as of September 24, 2024 is 6.25%.
Miller Value Partners stated the following regarding Gray Television, Inc. (NYSE:GTN) in its Q2 2024 investor letter:
“Our two largest detractors during the quarter were Nabors Industries (NBR) and Gray Television, Inc. (NYSE:GTN), whose share prices were down 17% and 16% respectively during the quarter. We think both company’s share prices are at deep discounts to their long-term fundamental value; we have recently increased both holdings. Gray Television remained under pressure during Q2, with ongoing marketplace concerns on the company debt leverage. Gray has limited maturities over the next 2 years and recently announced an opportunistic debt repurchase program. After a slow start to political advertising due to weaker than expected primaries, we expect to see a nice ramp in political advertising in the back half of the year. Gray’s strong local TV stations, #1 and/or #2 in 89% of their markets, has the company well positioned to achieve $500-700M in high margin political advertising in 2024. In addition, Gray has been outpacing peers in growing their core business over the past couple of years and still appear to be in the early innings of an improvement cycle. Management has recently retrained their salesforce with a greater focus on expanding their high margin digital market share over the next couple of years. In addition, ATSC 3.0 (industry new IP standard), provides opportunity for Gray to stream more content and capture new high margin digital revenue streams overtime. We see the potential for $2.5B of free cash flow generation over the next 5 years that could allow the company to rapidly de-lever their balance sheet and accrue value to the equity holder. With a greater than 80% earnings and free cash flow yield, and an attractive 6.2% dividend yield, we believe patient investors have potential to be rewarded over the coming years”.
At the end of the second quarter, 22 hedge funds held stakes in Gray Television, Inc. (NYSE:GTN), as per IM database, representing a collective worth of $469.77 million.
Overall, GTN ranks 3rd among the best dividend penny stocks to buy now. While we acknowledge the potential of GTN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GTN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey.